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When Should You Buy a Tiny House vs. an ADU Home?


With so many alternatives to traditional homes these days, homeowners may face analysis paralysis. For example, there is both a tiny house and an ADU homes movement, and knowing which one to buy can feel like a major fork in the road. This post will consider the pros and cons of each type of housing and give homeowners pointers on which one may suit them best. 

Defining the Differences

Aspiring homeowners sometimes confuse tiny homes and ADUs. Many homeowners don’t realize that size differentiates the two types of prefab homes. With that said, let’s examine their definitions. 

Prefab Tiny Homes

Thanks to HGTV’s Tiny House, Big Living, and Netflix’s Tiny Home Nation, young and old homeowners now flock to these miniature residences. By definition, a tiny house is a micro-dwelling that’s 400-square-feet or less. Yet still, it is fully equipped with a bathroom, bedroom, and kitchen. A tiny house typically sits atop wheels like a traditional mobile home. 

ADU Homes

The term ADU stands for accessory dwelling unit or auxiliary dwelling unit. They differ from tiny homes because they sit on a pre-existing lot occupied by a single-family household. They may or may not connect to the main house, but they’re stand-alone structures. ADU homes commonly function as studio apartments, art spaces, office units, and elderly housing. 

When They’re the Same

Sometimes, tiny homes sit on a foundation on a plot of land, making them permanent dwelling units. A tiny house of this sort can also be considered an ADU. 

The Key Deciding Factor – Your Lifestyle/Long-Term Goals 

Both tiny homes and ADUs offer a more loose lifestyle and a somewhat non-committal sense of homeownership. But if you want to make the best choice between the two, you need to choose the one that compliments your lifestyle goals best. 

Whatever choice checks off boxes on your “bucket list” is right for you. Considering the pros and cons of both housing types can help you decide which option is better. 

Pros and Cons of Tiny Homes

Pros of Tiny Homes

  • They’re quick to build
  • They’re inexpensive to use
  • They’re minimalist and discourage clutter
  • They’re fantastic rental units for college students and young couples
  • They allow residents to travel/relocate since they’re movable

Cons of Tiny Homes

  • They create legal challenges since they’re considered recreational vehicles (RV) by law
  • The law mentioned above makes them subject to RV codes and taxes
  • Their status as RV makes them illegal in many residential units and thus makes it challenging to place
  • Putting a tiny home on a permanent foundation requires a permit, which can be challenging
  • They’re often too small to comply with local zoning laws 

Pros and Cons of ADU Homes

Pros of ADU Homes

  • They provide more options for homeowners since they’re customizable 
  • They come in a variety of sizes
  • They’re more complicit with zoning laws than tiny homes
  • They can increase property value and provide income (as a rental property)
  • They have a low ecological footprint
  • Multipurpose use, including rental, hobbies, etc.

Cons of ADU Homes

  • They’re usually more expensive than tiny homes
  • They’re not mobile like tiny homes are 
  • They may offer less privacy depending on their proximity to the main house
  • ADUs make it trickier to choose your neighbors and surroundings

Your lifestyle goals and budget are the two key factors for choosing either a tiny home or ADU homes. Look closely at these pros and cons to weigh your must-haves and dealbreakers. But there is a rule of thumb to follow. 

A tiny home is ideal for childless homeowners who want a somewhat nomadic lifestyle without the frills of homeownership. An ADU is ideal for homeowners who are not quite ready for a traditional house but who want a balance of structure (excuse the pun) with some freedom to explore their passions. 

Insurance Policies 

Both ADU homes and tiny homes require insurance policies. They’re not exempt. The advantage of both ADU insurance and tiny home insurance is that they’re highly affordable. But since they’re subject to different zoning laws, you can expect to find differences between the two policies. 

For starters, there is the cost. The average cost of ADU insurance ranges between $500-$1500 for a six-month policy. For tiny home insurance, the average cost is just $600 a year. ADU homes tend to cost more on insurance since they’re larger and have more amenities than tiny homes. They also are more likely to need typical home repairs. 

There’s also the insurance policy themselves. Tiny home insurance is closer to mobile home insurance since they’re considered RVs from a legal perspective. The policies for tiny home insurance usually involve HO-1, HO-7, or RV coverage. On the other home, ADU insurance revolves around HO-3, which is common in traditional homes. 

For a Change of Pace or Place…

Both prefab tiny homes and ADU homes offer homeowners an alternative to homeownership. They’re both more affordable and accessible than traditional homes. They allow you to pursue certain hobbies more conveniently than in a regular house. 

Earlier, we offered an answer in terms of which one is better. With that said, you can try both – by means of a rental. Rent out a tiny home or an ADU home for small lengths of time to get a sense of what feels best. 

You’ll get an idea of which choice is right for you. In an upcoming post, we will also discuss how you can go about renting a tiny house or an ADU home if you’re interested in making a move. 

Here at CoverTree, we provide both ADU insurance and tiny home insurance. Get a quote now! 

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